Foreclosure

State of Delaware Sues MERS

In a new twist, the State of Delaware is suing MERS under the Unlawful and Deceptive Trade Practices Act (UDTPA.) The suit claims that MERS has left for borrowers “no public trail by which anyone can identify the principals or verify the propriety of the (mortgage) transfer.” The private and obscure nature of their database makes it difficult for consumers “to know of or challenge inaccuracies in the MERS System”  i.e. – who the heck holds the mortgage and who the heck has the right to foreclose?  Read more at Delaware Online

Obama Administration Offers Additional Mortgage Relief to Unemployed Homeowners

press release
7/8/2011

Today, the Obama Administration announced adjustments to Federal Housing Administration (FHA) requirements that will require servicers to extend the forbearance period for unemployed homeowners to 12 months. The Administration also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months wherever possible under regulator and investor guidelines. These adjustments will provide much needed assistance for unemployed homeowners trying to stay in their homes while seeking re-employment. These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn.

The changes to FHA’s Special Forbearance Program announced today will require servicers to extend the forbearance period for FHA borrowers who qualify for the program from four months to 12 months and remove upfront hurdles to make it easier for unemployed borrowers to qualify.

“The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers,” U.S. Housing and Urban Development Secretary Shaun Donovan said. “Today, 60 percent of the unemployed have been out of work for more than three months and 45 percent have been out of work for more than six. Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home.”

Changes to MHA’s Home Affordable Unemployment Program (UP) will require participating servicers to extend the minimum forbearance period from 3 months to 12 months for eligible unemployed homeowners, whenever possible subject to investor and regulator guidance for each mortgage loan. Additionally, forbearance under UP will become available to borrowers who are seriously delinquent.

All FHA-approved servicers must participate in FHA’s Loss Mitigation Program, which includes the Special Forbearance program. In addition to extending the forbearance period and removing the up-front hurdles for borrowers, the FHA also reemphasized its requirement that servicers conduct a review at the end of the forbearance period to evaluate the borrower for all additional, applicable foreclosure assistance programs and notify the borrower in writing whether or not he/she qualifies for any other available option. If the borrower does not qualify for any foreclosure assistance option, the servicer must provide the borrower with the reason for denial and allow the borrower at least seven calendar days to submit additional information that may impact the servicer’s evaluation.

These reforms build on successful Administration initiatives to support unemployed borrowers through the $7.6 billion Hardest Hit Fund and the $1 billion Emergency Homeowner Loan Program (EHLP). The Hardest Hit Fund, first announced in February 2010, provides support to 18 states and the District of Columbia, which represent the areas hardest hit by steep home price declines and unemployment, to design and implement programs to help struggling homeowners avoid foreclosure. Participating states have dedicated approximately seventy percent of program funds toward programs to help homeowners struggling with unemployment or underemployment. As of this month, each participating state is accepting applications from borrowers and providing direct mortgage assistance to those that qualify.

The EHLP program complements the Hardest Hit Fund, by serving the remaining 32 states and Puerto Rico. Congress provided $1 billion dollars to HUD, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to implement the recently launched program. EHLP assists homeowners who have experienced a reduction in income and are at risk of foreclosure due to involuntary unemployment, underemployment due to economic conditions or a medical condition. EHLP is expected to aid up to 30,000 distressed borrowers, with an average loan of approximately $35,000.

MERS Tells Members Not to Foreclose in name of MERS

An important announcement from MERS tells foreclosing attorneys NOT to foreclose in name of MERS. Housing Wire reports

“The electronic registry of mortgage records built by Fannie Mae, Freddie Mac and the nation’s major lenders more than a decade ago has been under increasing fire by homeowners, prosecutors, politicians and others. The drumbeat against MERS became louder last fall as robo-signing — the signing of foreclosure affidavits of indebtedness en masse, without proper review — surfaced. The robo-signing scandal caused several large servicers to temporarily halt foreclosures as they reviewed their procedures, and prompted an investigation of lenders and their servicing shops by all 50 attorneys general. A proposed settlement could involve some of the nation’s biggest servicers.”

In another press release from MERS:

FOR IMMEDIATE RELEASE

For more information, please contact:

Karmela Lejarde, 703-761-1274

Reston, Virginia Feb. 16, 2011—The United States Bankruptcy Court for the District of Kansas on Feb. 10, 2011 found that mortgages naming Mortgage Electronic Registration Systems, Inc are valid and enforceable. The ruling in Martinez v. Mortgage Electronic Registration Systems, Inc. upholds MERS’ role as an agent to hold the Mortgage for its member-lenders.

“The Kansas Bankruptcy Court held that the note and mortgage were never split due to this agency relationship,” said MERS spokeswoman Karmela Lejarde. “The Court found that Countrywide’s interest is secured, and it has the right to enforce the Note and Mortgage through its agent, MERS, or on its own by directing its agent to assign the mortgage to it.”

The Kansas Bankruptcy Court’s ruling sided with the majority of courts who have held that MERS is an agent for its members and found that the mortgage and note were not split. Please click here for a sample of these decisions.

The United States Bankruptcy Court in the Eastern District of New York (IN RE Agard, February 10, 2011) considered the same type of evidence as was before the Martinez court and did grant the motion for relief from stay in favor of U.S. Bank, the moving party in Agard. However, Judge Robert E. Grossman found that “MERS did not have authority as “nominee” or agent, to assign the Mortgage absent a showing that it was given specific written directions by its principal” (emphasis added).

“We disagree with the Court’s interpretation because State Courts in New York have already ruled that a written assignment of the note and mortgage by MERS, in its capacity as nominee, confers good title to the assignee,” said Lejarde, citing to U.S. Bank v. Flynn 897 NYS 2d 855 (Suffolk County Supreme Court, 2010).

Right of First Refusal has Come Alive

A neighboring condominium association just bought a unit in foreclosure under its “right of first refusal.”  For those of us in the Title Insurance industry, we expect to see a “Right of First Refusal” in condominium and homeowner association documents. We typically list the exception on title work, but most of us have rarely, if ever, seen a homeowners Association actually exercise that right- until now. Condominium and HOA Boards, in order to protect their communities, are taking title to these units that are in foreclosure and disrepair. They are repairing them, at the very least on the outside to protect the look of the community, and then renting them (often putting them on the market for sale while rented.) It can be a win-win. Rent comes in, the units are maintained and homeowners are protected. A good article in the Miami Herald gives more information.

Foreclosure Mess Created By Greed

It’s a disaster, no its not. We will insure it, no we won’t. Or wait a minute, yes we will. The Courts can’t seem to make up their minds. The states seem to disagree, some say the physical possession of the mortgage note is imperative, others not. But everyone agrees that both not being able to foreclose properties and removing homeowners from their homes is a mess.

We are paying for the poor quality work that many performed over the BIG years of mortgage lending.  Lenders lending to those who did not qualify; lender lending to those who could not afford the payments; lenders lending to those who were told that their houses would be worth more in the future and they could just continue to refinance… Which many did, and they are now seriously underwater.

We could blame all this on the Lending industry.  And we could believe that it will all be better because now (belatedly) the government is trying to regulate mortgage bankers with background checks, testing and licensing. But in the BIG picture, isn’t it the consumer who was negligent in making good decisions. Did they really need to refinance out their equity to get that new TV and computer equipment they wanted? You might way that they were “suckered into it” but where do we draw the line for personal responsibility? After all, many of us were tempted, but not all of us succumbed. And now we are all paying the price.

Foreclosure Mill Sold to China

Read more at  Bloomberg News

Attorney David Stern made about $146 million when he sold his non-legal foreclosure business to a company originally formed to do business in China, according to a regulatory filing. The non-legal foreclosure businesses are paid fixed fees for work, such as $400 for title searches, according to the regulatory filing and Stern’s remarks at the investor conference, as quoted in the securities lawsuit. Profit, of course, depends on cutting costs and boosting volume. The business is also reported to be supported by an operation in the Philippines that provides data entry and document preparation, according to the filing. The company was renamed DJSP Enterprises.

FNMA FHLMC Show Concern Regarding Bad Foreclosures

Lender Letter LL-2010-11 October 01, 2010
TO: All Fannie Mae Single-Family Servicers
RE:  Servicer Review of Procedures Relating to the Execution of Affidavits, Verifications, and Other Legal Documents

Issues have recently arisen with respect to potential defects with affidavits submitted by servicers in support of motions for summary judgment in states with judicial foreclosure processes. The issues pertain to whether the individuals executing the affidavits on behalf of the servicer had the required personal knowledge of the information contained in the affidavits and whether the affidavits were notarized in accordance with applicable requirements.
Fannie Mae is directing all of its servicers to immediately undertake a review of their policies and procedures relating to the execution of affidavits, verifications, and other legal documents in connection with the default process.  See full letter here.

New Systems have Short-Circuited Foreclosures

“The problem with foreclosures is that we have short-circuited all of the legal processes and safeguards that our courts are supposed to provide,” said Matthew Weidner, a real estate lawyer in St. Petersburg. Fla.

It will be interesting to see how each state deals with the foreclosure mill issues where law and order has given way to fast and dirty processing.  Clearly it is often unclear as to who “owns” the mortgage, who is foreclosing on behalf of whom,  or even has the mortgage been sold more than once to different parties.  It is certainly a debacle.

Read more at ABC News

MERS May be in Trouble Per Court Case

Over 62 million mortgages are now held in the name of MERS, a mortgage electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.  Read more at Stopforeclosurefraud

New York Judge Grants $100M in Damages in Foreclosure Case

NY couple Jane and Anthony Corcione are thrilled that the judge helped them in their 2 year lawsuit against Emigrant Mortgage Co.  The judge determined that the lender pay the borrowers $100,000 in damages and deleted as much as $119,330 in questionable late charges. See the You Tube  VIDEO HERE

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association